We have established an efficient system for differentiation, expansion and isolation of hepatic progenitor cells from mouse embryonic stem (ES) cells and evaluated their capacity to repopulate the diseased liver upon transplantation using a MUP-uPA/SCID mouse model of liver injury. The FACS-purified hepatic progenitorcells developed into mature hepatocytes without evidence of cell fusion and participated in rebuilding normal parenchyma with reconstitution of liver-specific zonal gradients of hepatic function. The ES cell-derived hepatocytes were responsive to normal growthregulation and proliferated at the same rate as the host hepatocytes after an additional growth stimulus from CCl4-induced liver injury. The transplanted cells also differentiated into biliary epithelial cells. These data demonstrate that a highly enriched population ofcommitted hepatocyte precursors can be generated from mouse ES cells in vitro for effective cell replacement therapy.In addition, we have now established a protocol for generating iPSCs from human fibroblasts by transduction with lentiviruses that independently expressed POU domain class 5 transcription factor 1 (OCT3/4) SRY-box containing gene 2, (SOX2),NANOG homeobox (NANOG), and Lin-28 homolog (LN28). These iPSCs recapitulate both the hepatocytic differentiation and morphological changes seen with the human ES cells. Recent studies suggested that induced pluripotent stem cells (iPSCs) retain a residual donor cell gene expression, which may impact their capacity to differentiate into cell of origin. We have recently addressed a contribution of a lineage stage-specific donor cell memory in modulating the functional properties of iPSCs. iPSCs were generated from hepatic lineage cells at an early (hepatoblast-derived, HB-iPSCs) and end stage (adult hepatocyte, AH-iPSCs) of hepatocyte differentiation as well as from mouse embryonic fibroblasts (MEFs-iPSCs) using a lentiviral vector encoding four pluripotency-inducing factors Oct4, Sox2, Klf4, and c-Myc. All resulting iPSC lines acquired iPSCs phenotype as judged by the accepted criteria including morphology, expression of pluripotency markers, silencing of transducing factors, capacity of multilineage differentiation in teratoma assay, and normal diploid karyotype. However, HB-iPSCs were more efficient in directed differentiation toward hepatocytic lineage as compared to AH-iPSCs, MEF-iPSCs, or mouse embryonic stem cells (mESCs). Extensive comparative transcriptome analyses of the early passage iPSCs, donor cells, and mESCs revealed that despite global similarities in gene expression patterns between generated iPSCs and mESCs, HB-iPSCs retained a transcriptional memory (seven upregulated and 17 downregulated genes) typical of the original cells. Continuous passaging of HB-iPSCs erased most of these differences including a superior capacity for hepatic redifferentiation. These results suggest that retention of lineage stage-specific donor memory in iPSCs may facilitate differentiation into donor cell type. The identified gene set may help to improve hepatic differentiation for therapeutic applications and contribute to the better understanding of liver development.